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Central Bank Confusion — Brian Romanchuk

Summary:
Most people are quite reasonably not concerned about economic theory disputes most of the time. But one needs to keep them in mind when keeping up with the latest events.Whenever you are reading commentaries about central banking outlooks, you need to ask yourself: are the people in the discussions using any of the mathematical models that the literally thousands of neoclassical doctorates employed by the central banks produced? If not, what exactly was the point of them? Why is it so important that MMT have lots of mathematical models of the economy (keeping in mind that critics ignore the ones that exist) when nobody even refers to the ones that are supposed to be relevant?Admittedly, one might not expect equity or credit analysts (or gold bugs) to keep up with DSGE modelling, but rates

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Most people are quite reasonably not concerned about economic theory disputes most of the time. But one needs to keep them in mind when keeping up with the latest events.

Whenever you are reading commentaries about central banking outlooks, you need to ask yourself: are the people in the discussions using any of the mathematical models that the literally thousands of neoclassical doctorates employed by the central banks produced? If not, what exactly was the point of them? Why is it so important that MMT have lots of mathematical models of the economy (keeping in mind that critics ignore the ones that exist) when nobody even refers to the ones that are supposed to be relevant?

Admittedly, one might not expect equity or credit analysts (or gold bugs) to keep up with DSGE modelling, but rates analysts — the primary target for rates discussions, allegedly — almost all have science/mathematical doctorates from fancy universities. If the models worked, the technical audience to use them is there. However, the only people interested in those models are those whose credentials are tied to the production of said models, which is not encouraging.…

Bond Economics
Central Bank Confusion
Brian Romanchuk
Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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